The relationship between lender, broker and borrower
Bob Hunt, chief executive of Paradigm Mortgage Services
The relationship between the various parties involved in the mortgage process is pretty complex – even if you might be able to boil it down to a simple lender-borrower relationship, that’s unlikely to be the whole truth, and nothing but the truth.
For instance, we know that over 75% of all mortgages are now intermediated, which places the adviser within that circle, and then what about the estate agent, perhaps the developer, or the surveyor, or the conveyancer? What about the freeholder if you’re an owner of a leasehold property? And then of course there’s the regulator(s) or the government who can also shape the mortgage process in some pretty fundamental ways.
The reality however is that, if you take the mortgage adviser out of that relationship circle, you might be hard-pressed to find the individual or firm which is working in the best interests of the client. Now, don’t get me wrong, the lender might well be able to say that they are looking after their interests, but I suspect the consumer/client doesn’t often feel like that.
It’s perhaps for this very reason that a recent YouGov survey suggested 68% of British people think lenders have ‘too much’ power over borrowers. This wasn’t necessarily all about mortgage lenders but also other sources of debt such as credit cards. However, there’s undoubtedly a disconnect between the recipient of the loan or credit, and the provider of that credit.
Debt of any kind is not necessarily going to be viewed in an entirely positive light, however it’s fair to say that without lenders providing in this area, the ability for most to secure (in particular) the big-ticket items is greatly curtailed.
In the mortgage sense, perhaps it’s not as big an issue, but we (as an industry) appear to be best placed to ensure there’s less of a disconnect between borrower and lender. Advisers will be increasingly important here because the use of technology is likely to mean that human interaction between borrower and lender, and the decisions that are made to secure a decision (or not as the case may be) will become less and less.
The story I read regarding the YouGov poll also referenced a report written on behalf of the think tank, the St Paul’s Institute, which looked at the relationship between borrowers and lenders asking whether they are now more ‘distant and anonymous’ because of the use of credit scoring, online banking, sourcing systems, etc, which are used to get a lending decision, rather than in the ‘good old days’ when it was about going to the local bank manager, and hopefully having them understand the client’s situation, their family, job, personal circumstances, etc.
Which again brings us back to the value of the adviser in all of this – and I suspect is a point which might have been overlooked by the St Paul’s Institute – because it really is the broker/intermediary who provides that old-school ‘bank manager’ approach. Getting to know the client, understanding their wants and needs and circumstances, being able to look at their existing situation and how this might change in the future, and tap into all of that (and so much more) before ensuring they have the right mortgage – and other products/services – to deliver the comfort and confidence they need.
Perhaps as an industry we don’t make enough of this service and what it can mean to borrowers. Take, for instance, those dealing with potentially vulnerable customers – you can’t tell me that the ability to empathise, to be a listener, to understand where they are in their time of life, and to help them through what might seem like incredibly complicated and difficult financial times and decisions, isn’t going to be welcomed by that borrower demographic. Of course it is.
So, while that lender-borrower relationship might appear to be on the wane, the truth of the matter is – certainly in the mortgage world – that the borrower ultimately has a much stronger relationship to fall back on. It’s now with the adviser and we should not be backward in coming forward to promote this, to help ease the concerns of borrowers and to ensure they do not miss out on a relationship which can truly deliver for them, every single time.